The Week Ahead: Global Central Banks and Critical Economic Indicators in Focus

Highlights

• ISM Non-Manufacturing PMI, jobless claims, and FOMC commentary critical for USD.
• RBA interest rate decision, retail sales, and Q2 GDP numbers crucial for AUD.
• China’s Caixin Services PMI and August trade data to influence market sentiment.

For the Dollar:

The all-important ISM Non-Manufacturing PMI survey will kickstart the week on Wednesday. With the markets tracking the data closely before the Fed meeting, we expect increased sensitivity to the ISM PMI. An unexpected rise in August would signal a robust US economy, able to absorb further rate hikes.

On Thursday, the weekly jobless claims will also need consideration. Another fall in jobless claims would paint a rosy picture of the US labor market.

Other stats include factory orders, trade data, and finalized Markit services PMI figures. However, we expect the numbers to have a limited impact on sentiment toward Fed monetary policy.

Away from the numbers, investors should monitor FOMC member commentary. Fed Vice Chair John Williams is on the calendar to speak on Friday.

For the EUR:

The EUR remains in the hands of ECB monetary policy expectations and the economic outlook.

On Monday, German trade data will move the dial. Weak global demand suggests disappointing imports and exports. Another modest increase in exports and another slump in imports would be bearish.

Service sector PMIs for Italy and Spain and finalized PMIs for France, Germany, and the Eurozone will draw interest on Tuesday. With the services sector accounting for a higher portion of the Eurozone economy, downward revisions to prelim numbers would test buyer appetite for the EUR.

On Wednesday and Thursday, the German economy will be in the spotlight. Factory orders and industrial production numbers will influence investor sentiment. A fall in factory orders and industrial production would spell more trouble for the German economy.

However, Eurozone GDP numbers for Q2 also need consideration on Thursday. Finalized inflation numbers from Germany will wrap up the week. Revisions to prelim numbers will move the dial.

Beyond the data, investors should monitor the ECB calendar and the news wires for commentary throughout the week.

For the Pound:

The BRC Retail Sales Monitor report for August will set the tone for the Pound on Tuesday. It is a double-edged sword for the Pound. Weather conditions impacted UK retail sales figures in July. The August BRC numbers must be upbeat to ease recessionary fears. However, a rebound in consumption would draw the scrutiny of the BoE.

Finalized service sector PMI numbers will also be in focus on Tuesday. An upward revision would likely provide modest relief.

Other stats include construction and composite PMI numbers and housing price figures. Barring a sharp fall in UK house prices, the numbers should not influence the BoE.

BoE Chief Economist Huw Pill offered hawkish forward guidance last week. Investors should monitor the news wires for more BoE commentary. No MPC members are on the calendar to speak this week.

For the Loonie:

The Bank of Canada will direct the Loonie. On Wednesday, the BoC will deliver its September interest rate decision. With the markets expecting the BoC to leave rates unchanged, the rate statement and BoC Governor Macklem comments will move the dial.

However, we expect trade data (Wed) and employment figures (Fri) to provide direction.

Out of Asia

For the Aussie Dollar:

The Aussie Dollar will also be in the hands of central bank activity. On Tuesday, the RBA will announce the September interest rate decision. Investors expect the RBA to remain in a holding pattern. A surprise rate hike would deliver a Loonie breakout.

While the RBA policy decision is the main event, investors should consider the economic indicators.

On Tuesday, retail sales numbers will draw interest ahead of Q2 GDP numbers on Wednesday. Trade data for July will wrap up a busy week. Better-than-expected GDP numbers and a jump in exports would drive the buyer appetite.

For the Kiwi Dollar:

The Kiwi Dollar will sit in the hands of private sector PMIs from China and market risk sentiment for a second week.

China Caixin Services PMI on Tuesday and trade data on Thursday will influence buyer appetite for the kiwi.

For the Japanese Yen:

The Japanese Yen needs close attention this week. On Tuesday, household spending and services PMI numbers will be in focus.

Bank of Japan Governor Ueda discussed the need for wage growth and demand to shift the inflation dynamic and move the BoJ away from ultra-loose.

A surge in household spending and an upward revision to the services PMI would be a step in the right direction.

On Friday, second quarter GDP numbers will wrap up the week.

Away from the numbers, Bank of Japan Board Member Nakagawa will speak. After mixed signals last week, hawkish chatter would deliver Yen support.

Out of China

The Caixin Services PMI will move the dial on Tuesday. After the better-than-expected Manufacturing PMI, a pickup in service sector activity would ease market jitters over the economy.

However, August trade data would need to send more upbeat signals to drive demand for riskier assets.